CenterPoint Energy 2009 Annual Report Download - page 99

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77
between the proceeds for the convertible debt and the amount reflected as a debt liability is recorded as additional
paid-in capital. As a result, the debt is recorded at a discount reflecting its below-market coupon interest rate. The
debt is then subsequently accreted to its par value over its expected life, with the rate of interest that reflects the
market rate at issuance being reflected on the income statement. CenterPoint Energy currently has no convertible
debt that is within the scope of this new guidance, but did during prior periods presented. The required retrospective
implementation of this new guidance had a non-cash effect on net income for prior periods and the Consolidated
Balance Sheets when CenterPoint Energy had contingently convertible debt outstanding. The effect on net income
for the years ended December 31, 2007 and 2008 was a decrease in net income of $4 million, or $0.02 per basic and
diluted share, and $1 million, or $0.01 per basic share and no change per diluted share, respectively. The
implementation effect on the Consolidated Balance Sheet as of December 31, 2008 increased Additional Paid-In-
Capital and Accumulated Deficit by $23 million.
Effective January 1, 2009, CenterPoint Energy adopted new accounting guidance on employers’ disclosures about
postretirement benefit plan assets which expands the disclosures about employers’ plan assets to include more
detailed disclosures about the employers’ investment strategies, major categories of plan assets, concentrations of
risk within plan assets and valuation techniques used to measure the fair value of plan assets. See Note 2(p) below
for the required disclosures.
Effective June 30, 2009, CenterPoint Energy adopted new accounting guidance on interim disclosures about fair
value of financial instruments which expands the fair value disclosures required for all financial instruments to
interim periods. This new guidance also requires entities to disclose in interim periods the methods and significant
assumptions used to estimate the fair value of financial instruments. CenterPoint Energy’s adoption of this new
guidance did not have a material impact on its financial position, results of operations or cash flows.
Effective June 30, 2009, CenterPoint Energy adopted new accounting guidance on subsequent events that
establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. CenterPoint Energy’s adoption of this new
guidance did not have a material impact on its financial position, results of operations or cash flows. See Note 15 for
the subsequent event related disclosures.
Effective July 1, 2009, CenterPoint Energy adopted new accounting guidance on the FASB Accounting Standards
Codification (Codification) and the hierarchy of generally accepted accounting principles. This new accounting
guidance establishes the Codification as the source of authoritative U.S. generally accepted accounting principles
recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities
and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP
for SEC registrants. CenterPoint Energy’s adoption of this new guidance did not have any impact on its financial
position, results of operations or cash flows.
In June 2009, the FASB issued new accounting guidance on consolidation of variable interest entities (VIEs) that
changes how a reporting entity determines a primary beneficiary that would consolidate the VIE from a quantitative
risk and rewards approach to a qualitative approach based on which variable interest holder has the power to direct
the economic performance related activities of the VIE as well as the obligation to absorb losses or right to receive
benefits that could potentially be significant to the VIE. This new guidance requires the primary beneficiary
assessment to be performed on an ongoing basis and also requires enhanced disclosures that will provide more
transparency about a company’s involvement in a VIE. This new guidance is effective for a reporting entity’s first
annual reporting period that begins after November 15, 2009. CenterPoint Energy expects that the adoption of this
new guidance will not have a material impact on its financial position, results of operations or cash flows.
In January 2010, the FASB issued new accounting guidance to require additional fair value related disclosures
including transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and
settlements relating to Level 3 measurements. It also clarifies existing fair value disclosure guidance about the level
of disaggregation and about inputs and valuation techniques. This new guidance is effective for the first reporting
period beginning after December 15, 2009. CenterPoint Energy expects that the adoption of this new guidance will
not have a material impact on its financial position, results of operation or cash flows.